Renewable Energy Subsidies Are a Waste of Money: Part 1

James H. Rust is a policy advisor for The Heartland Institute, a retired professor of nuclear engineering, and an outspoken critic of unnecessary alarmism over man-made global warming. He funds several scholarships for students majoring in chemical engineering at Purdue University. He currently is delivering a talk titled “America's Failed Energy Policies and The Reason Why.”

Last month solar companies Spectra Watt in New York, Evergreen Solar in Massachusetts, and Solyndra Solar in California went bankrupt. All companies had extensive subsidies from state and federal governments. Taxpayer losses most likely exceeded $1 billion. All three states have high electricity costs due to banning coal use and mandating renewable energy sources for electricity production.

Renewable energy sources such as solar, wind, and ethanol from corn require substantial subsidies from state and federal governments in order to stimulate product use. An example of solar subsidies are 35 percent of system cost up to $500,000 by the state of Georgia and 30 percent federal.

Subsidies for ethanol from corn are confusing to decipher; but one is payment of 45 cents for every gallon of ethanol mixed with gasoline and another is federal mandates for ethanol use of 15 billion gallons by 2015 and 35 billion gallons by 2022. Gasoline stations are paid to sell E-85 (mixture of 85 percent ethanol and 15 percent gasoline) for which Georgia has paid $10,000 per pump for three years use and similar subsidies from the U. S. Department of Agriculture.

E-85 sells for twenty cents per gallon less than gasoline and vehicles get 30 percent lower mileage. Only a person deficient in mathematics would use E-85.

Plug-in electric cars, such as the Nissan Leaf and Chevrolet Volt, have purchaser’s subsidies of $5000 from Georgia and $7000 federal. These cars are reported to travel 65 miles on a 30 kilowatt-hour charge for the Leaf and 35 miles for a 20 kilowatt-hour charge for the Volt. In evaluating electric cars you should go to the power plant source of electricity for its energy requirements. Thus a power plant charging these cars would have energy requirements of 90 kilowatt-hours for the Leaf and 60 kilowatt-hours for the Volt.

These energy requirements are equivalent to 2.4 gallons of gasoline for the Leaf and 1.6 gallons for the Volt. The equivalent miles per gallon of 27 for the Leaf and 22 for the Volt are poor compared to 40 achieved by conventional small cars that cost half or less of these cars. No mention is made of possible increased insurance charges or environmental effects involving collisions or battery disposal of electric cars.

Further transportation subsidies are payments for proposed charging stations for battery-powered vehicles and stations carrying compressed natural gas. The federal DOT gave Oregon $2 million to build 20 electric charging stations in Northwest Oregon. Very few vehicles of either type are in use.

The owners of Atlanta Station in Atlanta, GA recently announced the availability of three electric car charging stations that cost $3 per hour. It would cost $9 to recharge a Volt and $15 to recharge a Leaf that would travel 35 and 65 miles, respectively. No gasoline-powered car would cost more to travel these distances. Promoters of renewable energy sources claim their industry is in its infancy and subsidies are necessary so they can grow in size to compete with fossil fuels. In the early twentieth century, governments didn’t pay people to buy cars or subsidize gasoline purchases.

These industries have been around for close to 40 years or more. With present technology, they can’t compete with our very abundant fossil fuels. Thus there is no end in sight to subsidies unless fossil fuel use is eliminated by legislation or their costs increased by draconian environmental regulations. EPA is working on the latter alternative with help from organizations like the American Lung Association paid to do their bidding.

If fossil fuel energy prices escalate due to taxes or carbon dioxide tariffs, the cost of renewable energy sources will also increase with greater penalty for American citizens. Already China makes solar panels and wind turbines far cheaper than can be produced in the United States. Increased use of these energy sources only adds to the thriving economy of China to the detriment of the United States.

Renewable energy subsidies are paid by taxpayers and they can be considered investments that succeed only if all other energy prices skyrocket. Renewable energy subsidies are likened to playing lotteries in which winners pay a 300 percent tax on winnings. Taxpayers lose in all cases.

Use this argument against providing renewable energy subsidies: Annual subsidies must exceed $40 billion and waste taxpayer’s money in times both state and federal governments are in deep economic distress. An additional important factor is subsidies direct resources away from economical and practical solutions to our energy problems. Can you name an example where governments picked an economic winner?

Renewable Energy Subsidies Are a Waste of Money: Part 1 was last modified: January 31st, 2013 by James H. Rust